Amazon to acquire MGM Studios for $8.45 billion

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Amazon announced Wednesday that it will acquire MGM Studios for $8.45 billion, marking the company’s most daring step into the entertainment business and accelerating its streaming ambitions.

The transaction is Amazon’s second-largest in history, after only the $13.7 billion purchase of Whole Foods in 2017.

Amazon stated that it intends to use MGM’s legendary filmmaking history and diverse collection of 4,000 films and 17,000 programs to help improve Amazon Studios, its film and TV subsidiary.

โ€œThe true financial value of this transaction is the treasure trove of IP in the deep archive that we want to rethink and develop with MGM’s excellent team,โ€ said Mike Hopkins, senior vice president of Prime Video and Amazon Studios. โ€œIt’s incredibly exciting, because it opens up so many possibilities for high-quality storytelling.โ€

MGM Chairman Kevin Ulrich stated in a statement, “The potential to link MGM’s illustrious legacy with Amazon is an inspiring combination.”

Amazon’s stock scarcely changed in response to the announcement.

The agreement demonstrates Amazon’s readiness to pay heavily in order to compete in the congested streaming market. Amazon, Netflix, Disney, and other video streaming services have been devoting billions of dollars on licensing material and generating original programming in order to attract users.

Simultaneously, media behemoths have undergone further consolidation in order to acquire greater scale in order to compete with the likes of Amazon and Netflix. Discovery’s $43 billion merger with WarnerMedia following its split from AT&T, announced last week, is the latest indication of this.

Amazon has long been eager to make large investments in video programming as part of a goal to boost Prime subscriptions, which currently number more than 200 million worldwide. Last year, it spent $11 billion on video and music content, up from $7.8 billion in 2019. CEO Jeff Bezos has stated that these investments strengthen Amazon’s “flywheel effect,” in that they attract more Prime customers, who spend more money on the site.

Amazon has had in film and television programming, including “The Big Sick” and “Manchester By The Sea,” which won the 2017 Academy Award for best original screenplay, as well as the shows “The Marvelous Mrs. Maisel” and “Transparent.”

Another keenly anticipated project is the โ€œLord of the Ringsโ€ version, which is now in production. The first season of โ€œLord of the Ringsโ€ cost $465 million, making it one of the most expensive television shows ever produced.

Amazon has also made a big push into sports content, announcing an agreement with the NFL in May to start broadcasting Thursday Night in 2022.

In Hollywood, Amazon has a seasoned representative. Last week, the company announced the return of Jeff Blackburn, a former top Bezos lieutenant, to oversee a new Global Media & Entertainment division that will consolidate its entertainment offerings under one umbrella, including Prime Video, Amazon Studios, its music and podcasting businesses, Amazon Games, and Twitch.

MGM will expand Amazon’s and feature catalogue even further. The James Bond repertoire is owned by the Hollywood studio, which has produced several blockbuster shows such as “The Handmaid’s Tale” and “Fargo.” It also owns the premium cable network Epix and several successful reality TV shows such as “Shark Tank,” “Survivor,” and “The Real Housewives of Beverly Hills.”

MGM, a private firm, has been looking for a buyer for some years. Anchorage Capital, Highland Capital Partners, Davidson, Kempner Capital Management, Solus Alternative Asset Management, and Owl Creek Investments are among the firms that hold the studio, which emerged from bankruptcy in 2010.

Amazon’s antitrust concerns may be heightened as a result of the MGM acquisition. Multiple federal authorities, state attorneys general, and Europe’s antitrust watchdog are all investigating the corporation. Last October, the House Judiciary antitrust subcommittee produced a comprehensive report concluding that Amazon has monopoly power over third-party vendors on its marketplace.

The acquisition news comes only one day after Amazon was hit with additional antitrust charges. D.C. Attorney General Karl Racine stated on Tuesday that he is suing Amazon on antitrust grounds, claiming that the company’s pricing relationships with third-party sellers have unfairly boosted consumer prices and damaging competition. Amazon rebuffed the charges, claiming that sellers on its marketplace establish their own prices for their products.

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